CHAPTER ONE

GENERAL INTRODUCTION

1.0 INTRODUCTION

This chapter embodies a general introduction of the topic – The Settlement of Disputes in Maritime Commercial Transactions. The chapter comprises the background to the study, the research problem, research questions, objectives, methodology, literature review, theoretical framework of the study, justification, significance, scope of the study, limitations of the study, conceptual definition of terms and synopsis of the entire study.

     1.1BACKGROUND TO THE STUDY

Disputes are inevitable in any societal context. This is because humans are bound to disagree on and at almost every point in life as long as they interact. This explains why man has been described as a gregarious animal; thus, disputes must occur in the course of co-existence and interactions in daily activities. This is also true in the maritime sector[1]. Just as there are varying types of transactions, so are various parties involved in the marine industry. These include ship owners, charterers, the crew, insurance companies, port administrators, dock workers, inspection agents, bankers, sellers and buyers. Thus, the many contractual relationships generated are potential sources of disputes in the sector. The maritime industry is vital in the development of States. It has been recognised as one of the most economically viable industries capable of facilitating sustainable development. This makes it imperative to engage in amicable settlement of maritime disputes to guarantee unhindered trade and commerce environment[2].

Maritime disputes cover a wide range of areas, such as charter parties, bills of lading, sale of ships, ship financing, shipbuilding contracts and contracts of marine insurance. A maritime dispute may be a simple disagreement that could be solved quickly or a complex multi-party or multi-jurisdictional disagreement[3]. Disputes arising from navy contracts are often about the responsibility of the ship’s owner or the tenant for specific loss realised during the charter party contract term, such as the conflict about determining the tenant’s responsibility for damage to the rented vessel. Most disputes in the maritime industry involve cargo loss or damage. We also have conflicts which may arise to determine the responsibility of the ship’s owner or tenant regarding specific loss or for the disputes of ports and marinas’ safety for charging and discharging, or about the state of the ship when it is delivered to the owner, or disputes relating to demurrage. The dispute may also arise from a contract of affreightment wherein the carrier undertakes, following the Contracts of Affreightment, to implement several nautical consignments on one ship or more during the period of time agreed upon and thus, a dispute may arise over a series of voyage charter parties. Disputes may also arise about the conformity of the vessel when completed to the specifications agreed upon in advance between the contract parties. Some disputes about insurance aspects occur, especially among those who replace original beneficiaries following the principle of Subrogation[4].Disputes may arise related to maritime matters, such as lawsuits against the ship providers or disputes with port authorities. Conflicts may also arise out of marine accidents; due to the nature of the maritime collision, one does not imagine the existence of prior contracts between the parties obliged to settle the dispute through arbitration or mediation in marine collision cases[5].

Therefore, the settlement of these disputes is accomplished by resorting to the competent courts. Two fundamental issues are highlighted in any maritime collision: liability and compensation[6]. We equally have pollution-related conflicts. The internationally recognized definition of marine pollution was developed by the Group of Experts on the Scientific Aspects of Marine Pollution (GESAMP). GESAMP defines pollution of the marine environment as the “Introduction by man, directly or indirectly, of substances or energy into the marine environment (including estuaries) resulting in such deleterious effects as harm to living resources, hazard to human health, hindrance to marine activities, including fishing, impairment of quality for use of sea-water, and reduction of amenities”^[7].Marine pollution is a combination of chemicals and trash, most of which comes from land sources and is washed or blown into the ocean. This pollution results in damage to the environment, the health of all organisms, and economic structures worldwide.

There are several methods of resolving maritime commercial disputes. They include negotiation, mediation, arbitration and litigation. The first three are Alternative Disputes Resolution (ADR) Mechanisms. When it comes to mediation, the Black’s law dictionary^[8] defines it as a method of nonbinding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution; it is also termed case evaluation, facilitated negotiation. In International Law, it is a process whereby a neutral country helps other countries peacefully resolve disputes between them. In simple terms, mediation is a dispute resolution process involving peacefully solving conflicting situations between parties by a mediator. It is a structured, interactive process where an impartial third party assists disputing parties in resolving conflict through specialized communication and negotiation techniques. All participants in mediation are encouraged to participate in the process actively. Mediation is a “party-centered” process in that it is focused primarily on the needs, rights, and interests of the parties. The mediator uses various techniques to guide the process in a constructive direction and help the parties find their optimal solution. A mediator is facilitative in managing the interaction between parties and facilitates open communication. 

Arbitration is not very common between the insurer and the insured. If there is a dispute, there is, first of all, mediation. In any case, the need to balance the interests of the parties to the insurance contract is considered. As for vessel insurance, the indemnity is determined by the agreed value established by the parties. Under the Civil Law system, direct action is possible: the third party may sue the insurer directly. Under the Common Law system, the rule is different. The liable person must first pay the damaged victim; after that, this person has recourse against the insurer: the “pay to be paid rule”.

Arbitration on the other hand is an age-long Alternative Dispute Resolution (ADR) mechanism applied in the amicable settlement of disputes in a relaxed and semi-formal environment. It is particularly suitable for resolving commercial disputes because of the enforceability of arbitral awards as depicted by the existing international arbitral jurisprudence. There are, therefore, several considerations which helped flourishing maritime arbitration[9]. Maritime disputes submitted for arbitration are many and varied, some of which comes from the contract between the stakeholders and others arising from maritime accidents, and examples of the first group is the shipbuilding, repair, sold, leased and insured contracts , the transport of goods or people contracts, marine sales contracts as well as the diameter of maritime contracts. The second group is a maritime collision, Assistance and Rescue and the settlement of joint naval losses[10]. Maritime arbitration is, therefore, very common in the territory of marine affairs.

Litigation is an important method used in resolving maritime disputes. It is the process of carrying on a lawsuit.^[11] It has been defined as a legal action, including all the proceedings therein. It means action, cause or matter in courts of law.^[12] The history of litigation has been an adversarial dispute resolution, a win-lose process. With this process, it is rare to understand the underlying motives behind conflicts. Litigation involves the presentation of percipient and expert witnesses for deposition or trial. Globally, litigation is gradually giving way to alternative dispute resolution techniques such as negotiation, conciliation, mediation and arbitration.

1.2 STATEMENT OF THE RESEARCH PROBLEM

In resolving maritime commercial disputes, litigants make resort to either litigation or alternative dispute resolution mechanisms. In as much as these mechanisms have been instrumental in the resolution of disputes generally and maritime commercial disputes particularly, some lapses exist in their application. Litigation, a conventional mechanism in the resolution of disputes poses the problem of applicable law (conflict of laws) given that most maritime commercial transactions are international involving stakeholders from different countries in the world. When a dispute occurs it is necessary to consider which law applies to the dispute, which court or tribunal has jurisdiction to determine the dispute on its merits and whether there is any time bar.[13] As a solution, litigants tend to have recourse to ADR mechanisms which further raises the issue of enforceability giving that ADR mechanisms with the exception of arbitral awards are not directly enforceable on the parties to the dispute.

1.3  RESEARCH QUESTIONS

1.3.1 General Research Question

How effective are dispute settlement mechanisms in the resolution of disputes in maritime commercial transactions?

1.3.2. Specific research questions

1. What are the possible disputes that can arise from maritime commercial transactions?
2. What are the various ways of settling maritime commercial disputes?
3. To what extent have the existing mechanisms gone to put in place an amicable and effective solution to these disputes?
4. What policy recommendations are there to effectively settle maritime commercial disputes?

1.4 RESEARCH OBJECTIVES

1.4.1General Research Objective

The general objective of this work is to critically examine the various mechanisms used to settle maritime commercial disputes.

1.4.2 Specific Research Objectives

• To examine the categories of disputes which can arise from maritime commercial transactions
• To examine the various mechanisms used in settling maritime commercial disputes.
• To investigate the effectiveness of the measures put in place to settle maritime commercial disputes.
• To propose policy recommendations on how to effectively settle maritime commercial disputes.

[1]Ikenga K. E. Oraegbunam & Chienye Okafor, “Problems of Litigation in Settlement of Maritime Disputes For Nigeria Today: The Preference For Arbitration”, Academia, 2014. Available at Https://Www.Academia.Edu/26157404/Problems_Of_Litigation_In_Settlement_Of_Maritime_Disputes_For_Nigeria_Today:_The_Preference_For_Arbitration.Accessed on the 4^th of October 2022.

[2]Ekundayo Oluwaremilekun Babatunde, “Arbitration Mechanisms in Nigeria’s Maritime Disputes Settlement: Challenges and Prospects”, Brawijaya Law Journal, Vol.6 No 1 (2019), pp.1-26:1.

[3]Nick Coleman, “Conflict and Compromise Maritime Dispute Resolution”, GARD, (27 July, 2017). Available at https://www.gard.no/web/updates/content/23769855/conflict-and-compromise-maritime-dispute-resolution.Accessed on the 4^th of October 2022.

[4]Ahmed Dawood, “Arbitration in Maritime Disputes”, Journal of Shipping and Ocean Engineering, Vol.6, (2016), pp.206-211.

[5]Ibid.

[6]Ahmed Dawood, Op. Cit. p.207.

[7]Umo Iduk and Nitonye Samson, “Effects and Solutions of Marine Pollution from Ships in Nigerian Waterways”, International Journal of Scientific & Engineering Research, Volume 6, Issue 9, September-2015, pp.81-90. 

[8]Bryan A. Garner, Black’s Law Dictionary, USA, Thomson Reuters, 10^th edition, 2009, p.1070.

[9]Ahmed Dawood, Op. Cit. p.206.

[10]Ahmed Dawood, “Arbitration in Maritime Disputes”, Journal of Shipping and Ocean Engineering, Vol.6, (2016), pp.206-211:206.

[11]Anleu, Sharyn Roach, and Kathy Mack, “Trial Courts and Adjudication”, in Peter Cane, and Herbert M. Kritzer (eds), The Oxford Handbook of Empirical Legal Research (2010; online edn, Oxford Academic, 18 Sept. 2012), available at https://doi.org/10.1093/oxfordhb/9780199542475.013.0024.  Accessed  on 5^th October 2022.

[12]G C Nwakoby& F Anyogu, “Institutionalizing Alternative Dispute Resolution Mechanism in the Nigerian Legal System”, Vol.4, No. 1, UNIZIK.LJ.(2004), p.147.

[13] Yvonne Baatz et al, Maritime Law, 3rd Edition (Informa Law from Routledge, New York, 2014). P.2.